ICT and Global Economic Growth Contribution, Impact, and Policy Implications

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ICT and Global Economic Growth Contribution,
Impact, and Policy Implications
eDevelopment Services Thematic Group,
Informatics Program, ISG The World Bank
September 16 2004 Speaker Khuong Minh
Vu Research Associate, Harvard University
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The ICT Revolution and Economic Growth (2)
INPUT
OUTPUT
PROCESS

• Technology Progress
• Drastic progress in ICT products performance
  (with the processor chip at its core Moors Law)
• 1981 29,000 transistors (i8088)
• 2004 125 million transistors (Pentium 4)
• Dramatic decline in IT hardware price (by 2000
  times over 40 years, 1960-2000)
• New applications (the Internet)

• ICT penetration (1990-2000)
• PC 7.6 times
• Mobile Phone 57 times
• The Internet 1600 times
• Number of Internet hosts 300 times
• Global Phenomenon
• Expenditures on ICT
• Size and growth from 1,300 billion in 1992 to
  2,400 billion in 2001
• Way of life
• Time with PC
• Communications Learning

• Growth in ICT sector
• Ireland, India, Taiwan, Korea
• Growth in ICT-using sectors
• Banking, Health Care, Education, Consulting
• Manufacturing sector
• ICT-enabled businesses (Google, Allibaba.com)
• National economic growth
• Ireland, US, UK, Australia, Canada, Finland

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The ICT Revolution Drastic Decline in IT
Hardware Price (2)
Source BEA data
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The ICT Revolution The Pace of Digitization
1990-2000

• The Average Global Economic Growth 3
• The Average Growth in Total Trade 5
• The Average Growth in ICT Spending 8
• The Pace of Globalization 5-32
• The Pace of Digitization 8-3 5

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ICT enhances the Quality and Timeliness of
Decision Making
Risk
ICT
Certainty
Uncertainty
Ignorance
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Research Focus and Main Results

• Global Picture of ICT as a Source of Growth
• Magnitude of ICT contribution to growth
• Dynamics global ranking, convergence vs.
  divergence trend
• Determinants of Variations in ICT Contribution to
  Growth
• Impact of ICT on Economic Growth
• Share of ICT Contribution in output and ALP
  Growth
• Effect of ICT on Growth Quantity, Quality and
  TFP Growth
• Policy implications
• ICT production vs. ICT use
• Policy framework for promoting ICT penetration
• ICT for Development

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ICT as a Source of Growth ICT and Global
Capital Stock
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ICT As a Source of Output Growth 1995-2000 vs.
1990-1995
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The Global Pattern of ICT Contribution to
Growth 1995-2000 vs. 1990-1995
ICT Contribution to ALP Growth
ICT Contribution to Output Growth
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The Global Dynamics of ICT Contribution to
Growth 1995-2000 VS. 1990-1995
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ICT Contribution to Growth Convergence and
Divergence Trends
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Determinants of Variations in ICT Contribution
to Output Growth

• Income level
• Education
• Institutional quality
• Integration (Openness)
• English fluency
• Furthermore, impact of institutional quality,
  integration, and English fluency significantly
  accelerates over time.

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Share of ICT Contribution in Output Growth
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Effect of ICT on the Quality of Growth

• An increase in ICT Capital Stock per capita by
  10 adds nearly 0.1 percentage point to output
  growth, controlling for growth in capital and
  labor inputs
• For all the sample, ICT Stock per capita has a
  positive but not and statistically significant
  correlation with the net TFP growth (TFP growth
  less the contribution of changes in capital and
  labor quality. This relationship, however, is
  statistically significant for the G7 group.

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Policy Implications

• ICT Production vs. ICT Use
• The Dynamics of ICT Penetration
• Framework for Policy Agenda to Promote ICT
  Penetration
• ICT for Development
• Exploiting the Internet Revolution
• Utilizing the Internet to Promote Local Economic
  Development

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Policy Implications ICT Production
vs. ICT Use
What should be of a higher Priority for
Governments
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Policy Implications The Dynamic
Model of ICT Penetration
Promoting Investment in ICT Benefits vs. Costs
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Policy Implications Framework for
ICT Policy Agenda (1)
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Policy Implications Framework for ICT Policy
Agenda (2)

• The centrality of the concept issues
• ICT-producing sector vs. ICT applications
• Increasing the number of people making profits
  from investing in ICT is more important than just
  pushing for short-term ICT penetration
• Benefits is more important than costs in
  promoting the penetration of ICT
• Promoting ICT penetration should reinforce market
  forces instead of distorting them
• Knowledge and Wisdom vs. Information and Data

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Policy Implications Exploiting the
Internet Revolution
Fostering, Incentives Financial support
Policy Focus
Benefits from the Internet
Fostering, Incentives Financial support
Wisdom
Knowledge
Evaluated Understanding should should not,
better, best.
How
Participation, Facilitation
Information
What, Where, When, Who
Knowledge Hierarchy
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Thank you for your attention